Term life insurance is the most affordable and straight-forward type of life insurance.  It provides coverage at a fixed rate of payments for a specific period of time.  The typical terms are coverage lengths of 10, 20, or 30 years, whichever makes the most sense for your individual situation.  If you die within the term, your beneficiaries receive the death benefit amount to help replace your income.

Consumers are often at a loss on how much life insurance coverage they need.  Life insurance is one of the most important purchases you can make for your loved ones, and it’s understandable that you worry about choosing the right amount.  Quotacy can help.  By answering a few questions, you’ll have a better understanding on how much life insurance coverage you should own.

What is your current gross annual income?

This question refers to you alone, not the total household income.  Life insurance is designed to replace the income of the person who is insured.  We recommend having enough coverage that amounts to at least 10 years’ worth of your income.

Example:  Let’s say your annual gross income is $50,000.  This starts us off with a $500,000 policy.

Life insurance is designed to replace the income of the person who is insured.  We recommend having enough coverage that amounts to at least 10 years’ worth of your income.

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How many children do you have under the age of 26?  What level of college would you like to pay for your children?

These questions allow you to plan for college funds.  If you planned on paying for your children’s college tuition, these costs will also factor in to your life insurance coverage.  Whether the colleges you had in mind were public or private also makes a difference when calculating coverage.

Example:  Let’s say you have 1 child and want to be sure to cover the tuition of the local public university.  Four years at a public university is about $48,000 so now we’re looking at needing $548,000.

How much do you owe for your current mortgage?

Paying off your mortgage is essential in planning for the unexpected.  By knowing how much you owe on your mortgage, you can include this in your coverage amount as well so you do not leave your spouse with the responsibility of paying off the principal balance by his or herself.

Example:  Let’s say you owe $120,000 on your mortgage loan.  Adding that to the coverage amount, we’re now at $668,000.

How much do you currently have in savings?

Your cash savings, retirement plans, bank accounts, etc. can help reduce the amount of life insurance your loved ones will need to maintain their current standard of living.

Example:  Let’s say with your checking, savings, and retirement accounts you have $100,000 in assets.  You can subtract this so you are now looking at needing $568,000.

Following the hypothetical examples, you may need a life insurance policy that will leave about $600,000 behind to your loved ones (averaging and adding in final expenses such as a funeral and burial.)  A healthy 30-year old man could get a $600,000 20-year term policy for as little as $24 a month.  Keep in mind, these examples are not one-size-fits-all.  Everyone’s situation is different, so you may need less or more coverage.

When you run a term life insurance quote at Quotacy, not only do we not ask for your contact information, but we have a needs analysis tool that you can play with to determine exactly what you need in coverage.  Window shop in peace and don’t worry about having to guess at how much coverage to buy.  Quotacy agents are not paid on commission.  We work to get the policy that is best for you, not the one that costs the most.  More than 40 percent of Americans have no life insurance(1); let us help you not be part of these statistics.


(1) LifeHappens.org – Too Many Americans Without Adequate Life Insurance


Photo credit to: Grand Velas Riviera Maya


Related Posts:

Does Everyone Need Life Insurance?

Can I Buy Life Insurance on Someone Else?

What Happens if I Don’t Die While My Policy is In Force?


About the writer

Headshot of Natasha Cornelius, a life insurance writer, for Quotacy, Inc.

Natasha Cornelius

Marketing Content and Social Media Manager

Natasha is a content manager and editor for Quotacy. She has worked in the life insurance industry since 2010, and making life insurance easier to understand with her writing since 2014. When not at work, you can find her throwing a tennis ball for her pit bull mix, Emmett, or curled up on her couch watching Netflix. If it’s football season, the Packers game will be on. Connect with her on LinkedIn.

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